• Wed. Nov 29th, 2023

Interest Rates on Loans Edge Up to 19.9 Per Cent

UGANDA, Kampala | Real Muloodi News |  Interest rates on shilling denominated loans rose 2.2 per cent to an industry average of 19.9 in February 2021, up from 17.4 per cent in January. 

Foreign currency loans edged up from 4.7 per cent to 5.3 per cent, affirming the Uganda Central Bank’s report about currencies gaining a cash advantage in February.

The Central Bank rate had been stable at 7% since December 2020. However, a Ministry of Finance report showed a “market correlation factor, following a dip between December and January 2020,” as cited by Daily Monitor.

The report also shows economic activity gained ground in February 2021, as signalled by improvements in the high-frequency economic indicators during the same month. It largely attributed this to rebound inactivity following the conclusion of elections and preparations for a wider reopening of schools.

Similar reporting also shows how, in February, domestic borrowing of USh 901.2 billion and USh 461.11 billion rose through Treasury bills and bonds, respectively. The report shows USh 532.47 billion was from T-Bills and USh 975.65 billion was from T-bonds.

Securities worth USh 741.10 billion went out to the refinancing of maturing debt, while USh 767.02 billion went towards financing other items in the government budget.

Partly because of the slowing of economic activities during the election season, the stock of outstanding private sector credit increased by 0.4% to USh 17,911.5 billion in January 2021 from USh 17,845.4 billion.

Similarly, the slowdown growth from 2.2% recorded in December 2020 was because of the lower loan value approved during the month, according to the Ugandan Ministry of Finance.

The report, compiled by the Macroeconomic Policy Department at the Ugandan Ministry of Finance, also stated how “the value of loans approved in January declined to USh 533.9 billion. This is comparable to USh 1,198.6 billion approved in December 2020, citing a reduction in both credit applications and approvals in January, partly attributed to the service disruptions resulting from election-related activities.”